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23 Cards in this Set
- Front
- Back
market
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an institution or mechanism that brings together buyers ("demanders") and sellers ("suppliers") of particular goods, services, or resources
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demand
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a schedule or a curve that shows the various amounts of a product that consumers are willing and able to purchase at each of a series of possible prices during a specified period of time
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law of demand
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there is an inverse relationship between price and quantitiy demanded
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diminishing marginal utility
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successive units of a particular product yield less and less marginal utility
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income effect
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a lower price increases the purchasing power of a buyer's money income, enabling the buyer to purchase more of the product than she or he could buy before, a higher price has the opposite effect
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substitution effect
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at a lower price buyers have the incentive to substitute what is now a less expensive product for similar products that are now relatively more expensive ("a better deal")
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determinants of demand
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factors that affect purchases such as consumers' tastes, number of consumers, consumers' incomes, the prices of related goods, consumer expectations about future prices and incomes
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normal(superior) goods
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products whose demand varies directly with money income
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inferior goods
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goods whose demand varies inversely with money income
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substitute good
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one that can be used in place of another good
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complementary good
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one that is used together with another good
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change in demand
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shift of the entire demand curve
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change in quantity demanded
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a movement from one point to another point on a fixed demand curve
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supply
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a schedule or curve showing the amounts of a product that producers are willing and able to make available for sale at each of a series of possible prices during a specific period
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law of supply
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there is a direct relationship between price and quantity supplied
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determinants of supply
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resource prices, technology, taxes and subsidies, prices of other goods, price expectations, the number of sellers
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change in supply
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shift in the entire supply curve
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change in quantity supplied
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a movement from one point to another on a fixed supply curve
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surplus
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excess supply
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shortage
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excess demand
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equilibrium price
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no shortage and no surplus so price is at rest
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equilibrium quantity
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quantity supplied and quantity demanded are in balance
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rationing function of prices
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the ability of the competitive forces of supply and demand to establish a price at which selling and buying decisions are consistent
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